Accessibility is in. Even in the mercurial world of art – and its moneyed big brother, art investment – companies and galleries are making it ever easier to get your hands on an oeuvre, regardless of whether you’re looking to spruce up your lounge decor or portfolio.
Well, there’s another player on the market who’re looking to give the little guy a shot at entering the art market (worth US$1.7 trillion, or S$2.3 trillion) – without the usual prerequisite of having a rather sizable kitty beforehand. Enter New York-based Masterworks. It’s a platform that allows investors to own shares in ultra-exclusive, and therefore ultra-expensive, artworks like a Basquiat or a Banksy.
Said artworks aren’t just exclusive for their own sake. The Masterworks team selects the best artists based on a proprietary dataset to produce maximal risk-adjusted returns. In short, they pick out a piece of art that’s going to explode in value, get you to crowdfund it, hold it in a climate-controlled, secure environment. All while doing the legwork to find a buyer to sell it off for a tidy profit.
It’s a deliciously simple concept that completely transforms art as an asset class. Both risks and profits are pooled, enabling nouveau art investors to dip their toes into the market without fear of drowning. It’s a hitherto unheard-of concept, which is what makes it so exciting. It’s only available in the United States for now for US citizens, but it’s a concept that, given the proper traction, can spread as far as it needs to.
We speak to Masterworks’ CEO Scott Lynn on how he’s looking to democratize the world of art investment.
So why exactly should small investors hope to tap into the lucrative art scene?
The art market is centuries old – for example, Sotheby’s is approximately 275 years old and Christies is 250 years old. Art has been bought and sold between the ultra-wealthy for centuries. And when you look at the performance characteristics of the asset class (with contemporary art appreciating at 14 per cent from 1995 – 2020), it’s clear that it deserves a role in almost any investment portfolio.
Masterworks is the first way for anyone (both small and large investors) to gain exposure to art without spending millions on a painting, or tens of millions building a portfolio.
How does Masterworks make it profitable for them?
When you apply for membership at Masterworks, our membership team will work with you to understand how you’re investing today and how you should think about allocating art as an asset class. Depending on the size of an investor’s portfolio, investors can get started by allocating less than one per cent of their portfolio while they continue to learn more over time.
You’ve talked about picking out art from proprietary data on your website. Tell us a bit more.
We have the leading research team in the art market to understand returns by segment, as well as other characteristics such as correlation and loss rates compared to other asset classes. We spend a huge amount of time partnering with private banks (such as Citi, Bank of America, Goldman Sachs, and others) to help them and their clients better understand the asset class.
Smaller investors can also access our price database once they begin investing, which allows them to see individual returns (profits or losses) that collectors have made buying or selling paintings at public auction. The community learns along with us.
We noticed that you’re only talking about physical art. Ever looking to help clients invest in NFTs (non-fungible token art)?
We don’t have any plans to go into NFTs at this point. We don’t view NFTs as an investment, simply because there are no intellectual property rights that transfer with the digital artwork. We believe that a famous painting like the “Mona Lisa” denotes true scarcity, whereas NFTs create artificial scarcity.”
Click for more information on Masterworks.